Rates
So rates once again rose to new 2 year highs on Wednesday, just slightly under the 5.00% mark, most of my rates peaked at 4.75 and 4.875 for conventional loans.
So what caused this, well mainly uncertainty in the market on what the Federal Reserve is going to do with QE3, which is the $85B mortgage bond buying program.
For the last few years the Fed has been printing $85B in cash and then buying Mortgage Bonds, which in turn caused rates to fall.
Well over the last few months, since May, the Fed has prepared the market that they are going to stop this program, thus rates have increased almost 1.75%.
This week was no different, lots of chatter about what the Fed is going to do, all based on economic numbers.
So here is a date to keep in mind, September 18th, this is when the Fed will meet and it is expected they will announce that they are going to stop buying bonds.
If this happens, which most believe it will, I suspect we will see interest rates into the low to mid 5’s.
BUT……(as always)
Recent economic reports have come out, that is starting to show rates taking a big bit out of economy as they rise.
Case in fact is today new home sales, was expected to be down 1.4% was actually down 13.4%, a huge number especially since the last 12 months we have seen new home sales consistently increase.
So even though we did get a bounce off our 2 year lows today, I am still telling people lock them as soon as you can!
New FHA Program
FHA is releasing a new program called the “Back To Work” program.
Basically a person can purchase a home <1 year after a foreclosure or short sale, if they can prove that the FC or SS was caused by the Great Recession and direct loss of job. So basically if a person lost their job, with no fault of their own, and can prove it. They can get 96.5% financing through FHA.
Now there is quite a bit of documentation that is needed to prove it, typical government.
Also, lenders need to sign onto the program. Right now lenders are stewing over it, but I think IHA might go ahead and do it.
The overall positive of this is that lenders are loosening up guidelines.
Subprime is BACK!!!!!!!
Yes, subprime is back, believe it or not!
I have a lender who will do 60% loan to value with:
501 FICO score or higher
1 day out of Foreclosures or Short sale or Bankruptcy.
They will also do 24 month bank statement program for self-employed people.
Rates are nasty, but would you expect anything less for someone with a 520 FICO and just foreclosed their home last week….
The Boise Bubble
Well tons of people have asked me about the Boise Bubble, and when it will burst. Can Boise (Treasure Valley) keep increasing home prices by 20+%, can sales keep increasing by 10+%.
The answer is Nope, but it won’t burst, it will just slow down, here is why….
1st, home prices are continue to rise, remember in 2011 when you could buy a 1200 sq foot home in Boise for $80K, well that isn’t happening, as hope prices go up each month, more and more people are unable to purchase because of affordability.
2-Interest rates are continued to rise, as rates rise, more and more people are unable to afford the home.
Will home sales continue at a modest pace, YES!
As home prices continue to climb, more and more people will be able to sell, so there will be more inventories to choose from. And those sellers will be able to sell and purchase or move up.
So who is affected by all of this, well if you read back a year or more, I predicted that builders were going to have a GREAT comeback, because there were in the perfect position, well now I foresee a pull back for the builders.
Probably come spring, build times will start coming down as more and more existing home will come on the market.
This will also slow down our appreciation, which up until now has been INCREADABLE!
I foresee homes still appreciating, but more modest 5%-8% ish, or around typical numbers.
The wild cards:
Unemployment
Federal Reserve and interest rates, watch out for 9/18/2013!